DOHA/LONDON – Qatar was the top sovereign wealth buyer of European property in the last 12 months, spending 3.5 billion euros ($4.3 billion) on eight deals including the London Olympic athlete's village and a mall on Paris' Champs Elysees, data from a research firm showed. Qatar Investment Authority (QIA), the Gulf state's sovereign wealth fund, has more than $30 billion to spend on investments this year and sees commodities as a key target. “We like commodities, we like to invest in commodities. Since 2002, the commodity price trend keeps going up,” Hussain Al-Abdulla, QIA's executive board member said recently. “Also, because of the financial crisis, people are not investing enough in commodities. Maybe in 2016 and 2017 that might create a gap between supply and demand that might push the price even higher up.” QIA has been the most active of the region's sovereign wealth funds in recent years, deploying the Gulf nation's plentiful natural gas riches in assets ranging from German sports car maker Porsche to British bank Barclays. For Qatar, the world's biggest exporter of liquefied natural gas (LNG), that spending during the year to mid-August equals only about six weeks of revenue from its LNG exports, according to Reuters calculations. Sovereign wealth funds view top-quality property in the best locations as a safe bet in the global financial crisis. “For sovereign wealth funds like the Qatar Investment Authority (QIA), property deals are about wealth preservation, not returns,” said Joseph Kelly, director of market analysis at Real Capital Analytics (RCA). “They have a lot of money to spend, so deals tend to be big and in the cities they know well.” Gas market traders estimate that Qatar, with a native population of about 250,000, earned $36 billion in LNG revenue in 2011, though an exact figure is hard to obtain from available data. Qatar was beaten into second place as the biggest overall property investor in Europe by private equity giant Blackstone, which spent 4 billion euros on 19 deals, which included office blocks and industrial units, the RCA data showed. The QIA, the most active Middle East sovereign wealth fund in recent years, has spent 5.7 billion euros on real estate since 2007, almost 80 percent of it in London and Paris, RCA said. Qatar funded development of the European Union's tallest skyscraper, the Shard, which opened in London recently. It also owns Harrods department store and a 27 percent stake in Songbird Estates, the majority owner of London's Canary Wharf financial district. The QIA also has bought stakes in companies ranging from German sports car maker Porsche, Barclays and luxury goods house LVMH as it has sought to diversify economic risk. It has more than $30 billion to spend on investments this year alone and its spending strategy has been opportunistic, an executive board member said in April. “We have no asset allocation or geographic allocation. After the financial crisis, all that went in the garbage.” Al-Abdulla said. Asked whether the fund had assets worth $100 billion, he said, “much more”. The sovereign funds of Malaysia and Norway were among those also active in European real estate. The latter owns half of famous London shopping strip Regent Street and is nearing a $1.7 billion-plus deal for a majority stake in the Meadowhall shopping centre in north England. Qatar has the third-largest proven reserves of gas in the world, and is now the world's largest producer of LNG. Qatar's 20-year investment program, which focused on a strategy to commercialize its large natural resources, culminated in 2011. The State has placed a moratorium on development of new hydrocarbon projects until 2015 to give itself time to assess its production performance and carry out a comprehensive study of its offshore North Field, where its gas is produced. Qatar has embarked on a huge infrastructure investment program over the medium term- including roads, completion of the port and airport, and metro - for which the budget allocation is expected to be close to $100 billion. Equity injections and asset purchases by the government strengthened confidence in the financial system. QIA injected $2.8 billion of capital into the banking system in three tranches between 2009 and 2011. As a result, the capital adequacy ratio of the banking sector increased to 22.3 percent by end-June 2011. The average return on assets stood at 2.7 percent, and the non-performing loans ratio was 2.3 percent at end-June 2011. The exposure of local banks to European banks is limited. – SG/Reuters
